When transporting oil by train, oil is loaded onto tank cars carried by diesel trains that travel on railways across the country. Rail trails far behind pipelines as the second-most popular mode of transportation for oil, representing just 10 percent of oil transfer during its peak between 2010 and 2014. That said, the use of rail transport has increased in recent years, with the quantity jumping up from 16 million barrels shipped by rail in the U.S. in 2012 to 59 million in 2014.
The number fell a bit to 48 million in 2017, but it’s possible that rail will remain a viable competitor to pipelines for oil transportation.
While pipelines have fixed locations, rail transport can be more flexible for transporting oil and can deliver oil to and from a wider variety of locations on short notice, depending on market demand. Unlike pipelines, rail shipment does not necessarily require long-term contracts, nor is there a regulated rate of return. A pipeline, for instance, can’t raise its rates when service demand is high.
